Foreign businesses operating in China are facing increasing uncertainty and pressure from their own governments to reduce ties with the country. The recent ban on a senior Nomura banker from leaving mainland China has further highlighted the unpredictable environment for overseas businesses. Foreign firms in China have also faced scrutiny and raids, accused of ignoring national security risks and passing on sensitive information. These uncertainties, combined with geopolitical tensions and vulnerabilities exposed by the pandemic, have led many businesses to consider relocating or separating their Chinese operations. However, de-risking is proving challenging, especially for manufacturers who rely on China-based suppliers. One strategy is a “China plus one” approach, maintaining Chinese plants but directing new investments to other countries like India or Vietnam. Service companies that utilize data may have to adopt “China for China” strategies to comply with anti-espionage laws and restrictions on international data sharing. However, creating separate supply chains and detaching Chinese units from group oversight can be costly and pose risks. Despite the need to reduce exposure to China, foreign businesses have limited options. Clarity on future China policies is necessary for boards to plan for the long term. While Beijing should be cautious of pushing out valuable investments and know-how, US and European governments should acknowledge the stress they are causing to businesses. Ultimately, de-risking will be a slow and challenging process.

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By hassani

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